The community is a sign of the confidence developers have in the area's senior care market. Included in this segment are hospitals, nursing homes, retirement communities and assisted living properties. Of these options, assisted living facilities have begun attracting the largest influx of capital.

"Assisted living" means different things to different people. It's widely accepted, though, that assisted living facilities offer help with at least three activities of daily living, which include eating, bathing, dressing and taking medication. Residents do not require the daily skilled care that nursing homes provide.

"Ten or 15 years ago, it used to be that when someone got old or needed assistance, they would go to a nursing home," says Mark Schulte, president and CEO of Loop-based Brookdale Living Communities Inc., an assisted living development and management company.

Brookdale has grown rapidly in the last 18 months, adding 12 new properties -- five of them in the Chicago area -- to its national portfolio.

Many states, believing certain geographical areas are overserved, have limited new nursing home construction, says David Tester, president of the senior living services division at Downers Grove-based conglomerate ServiceMaster Co.

Assisted living property development, by comparison, traditionally has proceeded unfettered by such concerns -- and free from regulation. The reason: Assisted living is a relatively new concept, says Mr. Tester.

ServiceMaster has been in the assisted living business for about 10 years; facilities often were built as part of larger retirement or nursing home complexes. But four years ago, the firm began buying and operating stand-alone assisted living buildings across the country. The decision was a pragmatic one.

"Nursing homes are laden with regulation," says Scott Studebaker, vice-president of development for Providence Management & Development Co., a senior care operator in Lockport.

Developers also like the assisted living sector because it's versatile, says Fred Campobasso, president of AMDC Corp., a Chicago real estate developer specializing in health care properties.

"(Assisted living) is an easier deployment into the long-term care market," he says. "You can accomplish multiple goals -- offering a retirement setting, but also other services that many aging people require."

Such qualities are attracting capital from large real estate investment trusts. Investments in assisted living properties and ancillary hospitals and medical office buildings grew faster than shares in other areas of health care real estate, according to a 1997 report from New York-based PaineWebber Inc.

Heavy investment in the sector will cause a shakeout of smaller, less capitalized players, some experts predict.

"Up to one-third of publicly traded assisted living facilities will likely merge or consolidate within the next two years," Mr. Gamzon says.

Last January, for instance, Park Ridge-based Parkside Senior Services LLC announced a joint venture with an affiliate of RREEF Funds, a multibillion-dollar real estate investment firm. Initially, the affiliate invested $55 million in equity into Parkside, which is raising an additional $200 million in equity.

Armed with that capital, Parkside Chairman and CEO Michael McCarthy plans to buy or build approximately $800 million to $1 billion in senior housing in two years.

"Just within the last seven months, we've started $180 million in new development," he says. "If we keep on this fast track, hopefully we'll be able to reach ($1 billion)."

Mr. McCarthy actually favors more regulation in the industry as a way to shake out some of the ineffective management companies.

"There are real estate developers that are not operators, and they, for better or for worse, are not able to obtain financing, because (lending institutions) require a seasoned operator to run these businesses," he says.

Forcing second look

Mr. Campobasso, whose company has completed more than $1 billion in projects since 1984, agrees.

"Regulation may force some consolidation and might make some of the 'wanna-be' players in this business take a second look at development," he says.

Regardless of whether regulation is strengthened, the ultimate prosperity of these kinds of developments goes beyond the real estate issue.

Mr. Schulte says real estate expertise and cash alone do not guarantee success. Those in the industry must pay attention to the health care, hospitality, finance and marketing aspects, as well as other management components, of running assisted living properties.

"People haven't done well generally when they've come to the table with just one or two elements," says Mr. Schulte.

"If anyone looks at assisted living as purely a real estate venture," adds Mr. Tester, "then they are in all likelihood going to have significant problems."